Zomato Shares Fall Below Listing Price. Should You Buy, Sell Or Hold?

Shares of food delivery application operator Zomato fell as much as 10 per cent to settle below its listing price Rs 116 on Friday. Zomato made a stellar stock market debut on bourses in July last year. The stock opened for trading at Rs 116, marking a premium of 53 per cent compared to the issue price of Rs 76 and hit an all-time high of Rs 169 on November 16, data from stock exchanges showed.

Sharp fall in Zomato's stock price came on the back of higher cost of operations due to the tax imposition on the aggregator, analysts said.

"The costs have escalated due to the tax imposed on the aggregator, along with the fact that the lockdown is also not currently happening. We advise investors to set a target of Rs 90 for the stock and a stop loss of 127," said Ravi Singhal, vice chairman at GCL Securities.

Stiff competition from Swiggy is also impacting the company adversely.

"The technical setup in Zomato stock is in bearish formation on intraday and daily charts which may drag the stock to Rs 112-110 levels in near term. The valuations of the company are also not supporting the growth. Zomato is facing a tough competition from Swiggy in many terms mainly having a thinner metro restaurant network. We recommend investors to maintain the sell position on the stock," said Ravi Singh, vice president & head of research at Share India Securities.

Zoato raised Rs 9,375 crore from the IPO which was subscribed over 38 times in July last year.